chapter 14 operation management

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014

Slide 14.1

Chapter 14

Enterprise resource

planning (ERP)


Slide 14.2

Direct

Design Develop

Deliver

Operations management

Enterprise resource planning (ERP)

Enterprise resource

planning (ERP)

The operation supplies... the informational ability to

deliver products and services

The market requires specified time, quantity and

quality of products and services

Figure 14.1 This chapter covers enterprise resource planning (ERP)


Slide 14.3

What is ERP?

How did ERP develop?

How should ERP systems be implemented?

Key operations questions


Slide 14.4

Enterprise Resource Planning (ERP) systems are

integrated software solutions that automate a

company's administrative and core business

processes and have decision support capabilities.

What ERP covers...1. A sales order is made and recorded (Sales)

2. Parts are reserved or purchased and delivered (Purchasing

& Supply)

3. Labour is scheduled and charged (Human Resources)

4. The cost of parts is taken from general ledger inventory

accounts, and the revenue is booked and billed when the

order is completed (Finance)

5. The required goods are manufactured or assembled

(Production)

6. The completed order is shipped to the customer

(Distribution).

What is ERP?


Slide 14.5

Integrated

database

ERP integrates several systems

Purchasing and

supply

applications

Operations

applications

Financial

applications

Strategic

reporting

applications Sales and

marketing

applications

Delivery and

logistics

applications

Service

applications

HRM applications

Senior management and stakeholders

Employees

Su

pp

liers

Cu

sto

mers

Fro

nt-

offic

e s

taff

Back-o

ffic

e s

taff

Employees

Figure 14.3 ERP integrates information from all parts of the organization


Slide 14.6

Case Discussion

Read the case: SAP at Rolls Royce (Page 447)

Question:

1. What decisions did Rolls Royce take in adopting its ERP

system?

2. Which standard system to buy?

3. How to manage the implementation?


Slide 14.7

Web-integrated enterprise resource planning (collaborative commerce,

c-commerce)

Enterprise resource

planning (ERP)

Manufacturing resource

planning (MRP II)

Increasing integration of information systems

Incre

asin

g im

pa

ct o

n th

e w

ho

le s

up

ply

ne

two

rk

The development of ERP

Material

requirements

planning (MRP)

Figure 14.2 The development of ERP


Slide 14.8

Because software communicates across all functions, there is absolute visibility of what is happening in all parts of the business.

The benefits of ERP

The discipline of forcing business process-based changes is an effective mechanism for making all parts of the business more efficient.

There is a better sense of control of operations that will form the basis for continuous improvement.

It enables far more sophisticated communication with customers, suppliers and other business partners.

It is capable of integrating whole supply chains including suppliers suppliers and customers customers.


Slide 14.9

Strategic critical success factors

Top-management commitment and support strong and committed leadership at the top-

management level is essential to the success of an ERP implementation.

Visioning and planning articulating a business vision to the organization, identifying clear

goals and objectives and providing a clear link between business goals and systems

strategy.

Project champion the individual should possess strong leadership skills as well as

business, technical and personal managerial competencies.

Implementation strategy and timeframe implement the ERP under a time-phased

approach.

Project management the ongoing management of the implementation plan.

Change management this concept refers to the need for the implementation team to

formally prepare a change management program and be conscious of the need to consider

the implications of such a project. One key task is to build user acceptance of the project

and a positive employee attitude. This might be accomplished through education about the

benefits and need for an ERP system. Part of this building of user acceptance should also

involve securing the support of opinion leaders throughout the organization. There is also a

need for the team leader to effectively negotiate between various political turfs. Some

authorities also stress that in planning the ERP project, it must be looked upon as a change

management initiative not an IT initiative.

Strategic ERP implementation success factors

Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation

Based on Sherry Finney and Martin Corbett (2007) ERP implementation: a compilation and analysis of critical success factors, Business Process

Management Journal, vol. 13, no. 3, 2007, 329347.


Slide 14.10

Tactical critical success factors

Balanced team the need for an implementation team that spans the organization, as well as one that

possesses a balance of business and IT skills.

Project team there is a critical need to put in place a solid, core implementation team that is comprised of

the organizations best and brightest individuals. These individuals should have a proven reputation and

there should be a commitment to release these individuals to the project on a full-time basis.

Communication plan planned communication among various functions and organizational levels

(specifically between business and IT personnel) is important to ensure that open communication occurs

within the entire organization, as well as with suppliers and customers.

Project cost planning and management it is important to know up front exactly what the implementation

costs will be and dedicate the necessary budget.

IT infrastructure it is critical to assess the IT readiness of the organization, including the architecture and

skills. If necessary, infrastructure might need to be upgraded or revamped.

Selection of ERP the selection of an appropriate ERP package that matches the businesses processes.

Consultant selection and relationship some authorities advocate the need to include an ERP consultant as

part of the implementation team.

Training and job redesign training is a critical aspect of an implementation. It is also necessary to consider

the impact of the change on the nature of work and the specific job descriptions.

Troubleshooting/crises management it is important to be flexible in ERP implementations and to learn from

unforeseen circumstances, as well as be prepared to handle unexpected crises situations. The need for

troubleshooting skills will be an ongoing requirement of the implementation process .

Tactical ERP implementation success factors

Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation

(Continued)

Based on Sherry Finney and Martin Corbett (2007) ERP implementation: a compilation and analysis of critical success factors, Business Process

Management Journal, vol. 13, no. 3, 2007, 329347.


Slide 14.11

Case Discussion

Read the case: What a waste! (Page 449)

Question:

Why did things go wrong with the relationship

between SAP and Waste Management?


Slide 14.12

Material requirements planning (MRP) is a computer-

based information system that is designed to answer

three questions:

1. What is needed?

2. How much is needed?

3. When is it needed?

MRP is the common technique for dependent

demand, where the demand for one item is related to

the demand for another item

ERP is originated from MRP


Slide 14.13

Material

Requirements

Planning

1. Master

production

schedule

Customer

orders

Forecast

demand

2. Bill of

materials

3. Inventory

records

Purchase

ordersMaterials plans Works orders

Overview of MRP


Slide 14.14

The process of MRP

Explode the master production schedule.

Identify what parts and assemblies are required.

Check whether the required parts and assemblies are available.

For every part or assembly that is required, but not available, identify

when work needs to be started for it to be made available by its due

date.

Generate the appropriate works and purchase orders.

Repeat the process for the next level of the bill of materials.


Slide 14.15

Months January February

Aggregate Production Plan 1,500 1,200(shows the total quantity of amplifiers)

Weeks 1 2 3 4 5 6 7 8

Master Production Schedule(shows the specific type andquantity of amplifier to beproduced

240 watt amplifier 100 100 100 100

150 watt amplifier 500 500 450 450

75 watt amplifier 300 100

1. Master production schedule


Slide 14.16

B(2) Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/ amp-booster1

E(2)E(2) F(2)

Packing box and installation kit of wire,

bolts, and screws

Std. 12 Speaker booster assembly

2

D(2)

12 Speaker

D(2)

12 Speaker

G(1)

Amp-booster

3

Product structure for Type (A) Amplifier

A

Level

0

2. THE BILL OF MATERIALS


Slide 14.17

Product structure for a simple board game

Box lid10077

Box base assembly

10089

Quest cards10023

Character set

10045

Dice10045

TV label10062

Game board10033

Rules10056

Inner tray

23988

TV label10062

Box base

20427

Board game

00289

Level 2

Level 1

Level 0


Slide 14.18

Gross requirements Total expected demand

Scheduled receipts Open orders scheduled to arrive

Projected Available Expected inventory on hand at the

beginning of each time period

Week Number 1 2 3 4 5 6

Gross Requirements

Scheduled Receipts

Projected on hand

Net requirements

Planned-order-receipt

Planned-order release

Net requirements Actual amount needed in each time period

Planned-order receipts Quantity expected to received at the beginning

of the period offset by lead time

Planned-order releases Planned amount to order in each time period

3. MRP Record


Slide 14.19

Toy

Frames (2)Wood

sections (4)

Example of MRP


Slide 14.20 Week Number Beg. Inv 1 2 3 4 5 6 7 8

Quantity needed 100 150

Shutters | LT = 1 Week

Gross Requirements 100 150

Scheduled Receipts

Projected on hand

Net requirements 100 150

Planned-order-receipt 100 150

Planned-order release 100 150

Week Number Beg. Inv 1 2 3 4 5 6 7 8


Frames | LT = 2 Week


Scheduled Receipts

Projected on hand




Week Number Beg. Inv 1 2 3 4 5 6 7 8


Wood Sec | LT = 1 Week


Scheduled Receipts 70

Projected on hand 70 70 70




x 2 x 2


Slide 14.21

Exercise

Consider the bill of material for Product J and the data given in

the following table. The gross requirements for J are 200 units

in week 6 and 250 units in week 8. Develop the MRP tables

for each item for an 8-week planning period. Use the lot-for-lot

lot-sizing rule.


Slide 14.22


Slide 14.23


Slide 14.24

Psycho Sports Ltd

Next week case

Source: Shutterstock.com/Chen WS

chapter 14 operation management

Documents

alistair brandonjones

robert johnston

edition nigel slack

key operations questionsslack

sales order

completed order

integrated databaseerp

cost of parts